Pricing forms the financial backbone of every construction contract. In the United Arab Emirates, remuneration is not merely a commercial term; it is a legal requirement, embedded in the very definition of a Muqawala. Disputes over lump sums, omitted price terms, variations, hardship, and termination ultimately hinge on how the law interprets and enforces payment obligations.

The UAE is in the process of transitioning from Federal Law No 5 of 1985 on Civil Transactions (“Civil Code of 1985”) to Federal Decree-Law No 25 of 2025 on Civil Transactions (“Civil Code of 2025”), which will come into effect on 1 June 2026. This shift modernizes the regulatory framework for construction pricing while retaining remuneration as a fundamental contractual element.

Price as an Essential Element of Muqawala

Under the Civil Code of 1985, Article 874 defines muqawala as a contract where one party undertakes work in return for remuneration. The presence of remuneration is therefore integral to the contract’s legal nature. Article 129 further provides that a contract cannot be considered concluded unless the parties agree on the essential elements of the obligation, including price or at least a determinable method for calculating it. The UAE Federal Supreme Court has consistently held that offer and acceptance must clearly reflect agreement on essential elements. Incomplete negotiations on remuneration may prevent a binding contract from forming.

The Civil Code of 2025 preserves this principle. Articles 124 and 131 require mutual consent on essential elements for a contract to be valid. However, the Civil Code of 2025 introduces commercial flexibility: where essential terms are agreed but subsidiary matters remain unresolved, a contract may still be concluded unless the parties expressly state otherwise. In disputes over these unresolved issues, including pricing, Courts may determine a fair solution in line with the nature of the transaction and applicable law.

Lump Sum Contracts and Price Adjustments

Under the Civil Code of 1985, Article 887(1) governs lump sum contracts. Contractors cannot demand an increase in remuneration required to execute an agreed plan. As a result, the contractor bears the risk of increased costs unless the employer instructs modifications or additional work.

The Civil Code of 2025 introduces a formal hardship mechanism. Article 829 allows the Courts, in cases of exceptional and unforeseeable circumstances that make performance excessively onerous, to restore contractual balance. Courts may adjust remuneration, extend deadlines, or, where adjustment is impossible, order termination